Cruise berthing in Cayman: A history of starts, stops and controversy

In 2000, a little more than one million cruise ship tourists visited Grand Cayman. By 2003, that number jumped more than 76 percent to 1.82 million. Although there had been some talk of a cruise ship berthing dock on Grand Cayman previously, it was during this three-year period that elected and tourism officials first started seriously discussing the need to improve Cayman’s port facilities, including the possibility of creating piers at which cruise ships could dock.

Almost as soon as the discussion started, so did the warnings, including some from then-Leader of the Opposition Kurt Tibbetts. In his debate on the budget in June 2003, Mr. Tibbetts – who is now a part of the government pushing for cruise-berthing piers – chastised the then-government for ignoring the advice of its own tourism development plan that warned of the negative impact of “huge volumes of cruise ship visitors on the environment, the community and the number of stay-over visitors.”

“[T]he government seems intent on a course of action to encourage even more cruise ship visitors,” he said. “It seems like the government is pursuing this course of action despite the overwhelming evidence across the region that concomitant with an increase of cruise ship visitors is a drop in the number of stay-over visitors. Statistics prove that and on reflection it is easy to understand why.”

A report titled “Focus for the future: A tourism policy framework for the Cayman Islands” prepared in 2003 for the Ministry of Tourism by a U.K. consultancy firm highlighted several of Mr. Tibbetts’s concerns, particularly with regard to the impact of increased cruise tourists on the number of stay-over tourists.

“The growing imbalance between the two visitor types is one of the overriding issues raised by tourism stakeholders in the Cayman Islands,” the report stated. “Such large volumes of relatively low-spending visitors is seen as a deterrent to stay-over visitors, seriously diminishing the quality of the experience in George Town and at the key attractions, e.g. Stingray City. It is also seen as a major contributor to congestion and the quality of life for residents.”

The report identified “the inordinate increase in cruise passengers” as a threat to Cayman’s tourism industry and said the volume of cruise ship passengers was contributing to the perception of Cayman being “just another Caribbean island.”

Among the key recommendations of the report with respect to cruise tourism were placing a limit on the maximum number of cruise tourists allowed on any given day – suggested to be 9,200 passengers, subject to a more detailed analysis – and making improvements to the George Town cruise terminal. However, the report did not specifically recommend a cruise ship berthing facility.

Others, like the late diving-industry pioneer Bob Soto, warned of the environmental damage that constructing piers for cruise ships could cause to the coral and marine life in George Town Harbor. In addition, Mr. Soto warned that building a pier or piers long enough to accommodate cruise ships could change ocean currents in such a way that it could lead to sand depletion along Seven Mile Beach.

Changing landscape

Several things happened in 2003 and 2004 to alter the initial thinking about the importance of cruise ship tourism. First, stay-over tourism figures failed to rebound to the pre-9/11 terrorism attack numbers, dipping below 300,000 in 2003. Then, Hurricane Ivan devastated Grand Cayman in September 2004, sending stay-over tourism into a long decline while the island – and particularly its accommodations – were rebuilt. Cruise tourists, on the other hand, returned to Grand Cayman in strong numbers starting eight weeks after the hurricane and by 2005 Cayman was seeing cruise passenger numbers nearly as high as in 2003.

In September 2003 Royal Caribbean Cruises Ltd. announced it had ordered Freedom of the Seas, the first of what became three ships in the Freedom class, destined to become the world’s largest passenger ships for a time, with capacity to carry more than 3,600 passengers. Tendering that many cruise passengers from a ship in George Town Harbour, while doable, certainly is not ideal in terms of efficiency. The case for a cruise berthing facility on Grand Cayman was becoming stronger.

Early attempts

In July 2004, then Leader of Government Business McKeeva Bush of the United Democratic Party announced that the Cayman Islands government had received three different proposals, including one from a cruise line, to create a pier that could accommodate berthing for four ships. He also said that there was still a plan to create a basin port in East End that could serve as a home port for a major cruise line. Hurricane Ivan two months later put a pause to that effort before it really got started. A change in government in May 2005 ended the plan entirely.

The new tourism minister after the 2005 elections was People’s Progressive Movement member Charles Clifford, who was very familiar with the issues relating to cruise tourists, having previously served as the Ministry of Tourism’s highest-ranking civil servant. Within months of taking office, Mr. Clifford announced he would start the process to develop cruise berthing facilities, noting that Grand Cayman was one of the few remaining ports in the western Caribbean that did not have berthings.

“From that point of view, the destination was in danger of becoming uncompetitive with other destinations,” he noted in the Legislative Assembly in October 2006. “We know that the provision of berthing facilities in the country will allow our cruise ship passengers to spend more time on shore and therefore the average spend per cruise ship visitor … will be improved. Once we have berthing facilities, they will have the opportunity to spend much more time on shore shopping and taking advantage of our attractions and other activities … .”

Another argument for building a cruise berthing facility included the observation that more passengers come on shore when berthing is available as opposed to when passengers have to be tendered ashore, something which is largely due to the length of time it takes to get off and back on a cruise ship when tendering.

In June of 2006, Mr. Clifford announced that the location of the cruise berthing facilities would be George Town Harbour. The following month he said that the initial phase of getting an environmental impact assessment done for the project had begun.

It wasn’t until almost two years later, in May 2008, that a property developer in Cayman known as Atlantic Star Limited acknowledged that they were participating in discussions with the government and private partners about the development of the berthing facilities. In late July of 2008, Mr. Clifford announced that a memorandum of understanding had been signed with Atlantic Star to create a four-ship cruise berthing facility in George Town Harbour that would involve moving the cargo dock further north in the harbor to a new facility. As part of the plan, he said it was likely some of the roads in George Town, particularly Harbour Drive from Fort Street to Goring Avenue, would be pedestrianized.

Although the financing model hadn’t been worked out, Mr. Clifford estimated that creating the two new facilities would cost about US$230 million.

Mr. Clifford said that relevant stakeholders, including the Cayman Islands Tourism Association, the Association for Advancement of Cruise Tourism and the Cayman Islands Chamber of Commerce had all been consult ed and were in support of the concept.

Despite the onset of the global financial crisis in the fall of 2008, the government pressed on for a time with its plans with Atlantic Star. U.S.-based CH2M Hill was chosen to conduct the environmental impact assessment that was to start in January 2009, concurrent with public meetings on the project.

In a meeting on Jan. 13 that attracted about 150 people, many concerns – ranging from environmental marine damage to the impact on stay-over tourism – were expressed.

The option of developing the berthing facility in Red Bay instead was also raised. In addition, concern was expressed about how much control the developer Atlantic Star would have over the planned upland portion of the facility.

Shortly before the 2009 general elections, Mr. Clifford announced that the environmental impact assessment, which was originally estimated to take four months, would take longer than anticipated. A couple of days later, Atlantic Star’s operations manager, Gary Lindsay, in response to questions about staff members who had left the company, said it was never planning on building the berthing facilities, but was “just the investor.”

“We haven’t a deal yet with the government and the Port Authority,” he said, adding that it was impossible to know how long the negotiations would take.

That question was answered less than two weeks afterwards, when the United Democratic Party handily won the general elections and regained control of the government and specifically the Ministry of Tourism: Charles Clifford was out, McKeeva Bush was back in and Atlantic Star’s involvement was over.

DECCO to GLF and Royal Construction

Less than a month after the elections, Mr. Bush announced that government backbench MLA Cline Glidden Jr. had been asked to coordinate the process to develop several tourism-related infrastructure projects, including a cruise berthing facility. Mr. Bush said he intended to get a “plan in place very quickly for the development of cruise berthing facilities.”

In August 2009, the vice president of Royal Caribbean International, Michael Ronan, visited Cayman and confirmed that the cruise line would not bring its planned Oasis-class ships to Grand Cayman. This class of ship, still the largest in the world, can carry more than 5,000 passengers, a number that would be too difficult to off-load in a timely manner using tenders.

“We’re not calling anywhere where the ship cannot dock,” he told government officials. “Build it and we will come. Don’t build it and we will not come.”

Not only was Cayman faced with the prospect of missing the calls of the Oasis-class ships, but Royal Caribbean said that the newer, larger ships would replace some of the older ships servicing the Caribbean, meaning Cayman would lose those calls as well.

During the same meetings that brought Mr. Ronan to the Cayman Islands, Florida-Caribbean Cruise Association President Michele Paige pointed out that while cruise berthing facilities would help establish Grand Cayman as a must-visit port, no one was going to guarantee a minimum number of passengers if it were built.

“There are no guarantees in our industry,” she said.

The government received several expressions of interest with regard to the port development, and in November, 2009, announced that it had approved “a non-binding memorandum of understanding with DECCO Ltd. and the Florida-Caribbean Cruise Association” with the idea that it would eventually lead to a formal memorandum of understanding. The key terms of the proposed development involved DECCO Ltd. – a subsidiary of the Dart Group of companies – developing the port at its expense and recouping the investment through the fees paid on all cruise ship visitors.

A formal memorandum of understanding was signed with DECCO in April 2010. At the time, Mr. Bush said the government was committed to protecting existing revenue flows to the Port Authority and ensuring the Port Authority retained effective ownership and control of the port’s land, piers and operations.

In August 2010, Mr. Glidden, who by that time had been made the ministerial councilor for tourism, said that the project had expanded in scope beyond the building of two cruise berthing piers and that the estimated cost of the project had increased to about $200 million, up $50 million from what had been announced when the memorandum of understanding was signed. Three weeks later, Mr. Glidden said the total cost of the project was estimated at $300 million, including $100 million for reclaiming eight acres of sea that would be used for an upland portion of the project. In addition, Mr. Glidden said DECCO, by funding the project and taking on all the risk, could get a “master lease” on the berthing facility for a term between 21 and 99 years in order to recoup its investment and make a reasonable profit.

The potential length of the lease attracted public opposition to the proposal and in December 2010, when the two sides couldn’t reach an agreement – primarily on the length of the master lease – the negotiations collapsed. The government announced it was pursuing the development of the cruise berthing facility with the Florida-based GLF Construction Company, working in cooperation with Cayman-based Royal Construction. That team, the government said, had ranked second in the original scoring matrix that had selected DECCO as the top developer.

Howard Finlason, the spokesperson for the GLF/Royal team, said that the project financing arrangement would include an upland portion of the development, but that the lease wouldn’t be any longer than 30 years. The GLF/Royal plan also involved reclaiming sea for upland development, but 4.5 acres instead of the eight acres DECCO had proposed.

GLF/Royal signed a framework agreement with Cayman’s Port Authority and the Cayman Islands Government on Dec. 15, 2010 with the goal of negotiating a final contract within four months. However, in mid-January, Mr. Bush announced at a conference that a Chinese construction group was interested in doing several projects on Grand Cayman and indicated it was prepared to take on the cruise berthing facility as well. Mr. Finlason said he had no problems with Mr. Bush’s back-up plan because he was confident it wouldn’t be needed.

With a tight deadline, GLF/Royal worked very quickly in getting a plan for two piers that would accommodate four cruise ships, including one Oasis-class ship. In February 2011, it had captains from Royal Caribbean and Carnival Cruise Lines pilot simulated ships through the proposed port design at Fort Lauderdale’s STAR center. The GLF team then turned its attention to having an environmental impact assessment done. Mr. Finlason said he anticipated being able to start construction on the project in June of that year.

However, GLF/Royal never had the chance.

On April 14, 2011, Mr. Bush and the government terminated the framework agreement it had with GLF, stating that it had not “demonstrated any positive proof that it was able to finance the port expansion project.”

GLF President Francesco Senis disagreed, saying the company had a commitment letter for the full project financing from Citibank, as well as from some private equity firms.

Mr. Finlason said his group was “in shock” over the abrupt decision.

“We have done everything we were to do in the time frame it was asked for,” he said.

Months later, copies of emails surfaced which indicated that on the same day Mr. Bush terminated the GLF/Royal agreement, Mr. Glidden had written to all of the other elected members of the United Democratic Party recommending the government move to a formal commitment with GLF/Royal and stating that they had demonstrated “their ability to completely finance the port project.”

“I think that it is obvious that GL F has stepped in and in a very short four-month period has taken the project to the required stage where there is now an acceptable plan to the cruise lines and an acceptable plan to the financial institutions which are willing to finance the project.”

Days after the termination of the GLF/Royal agreement, the Port Authority board of directors sought legal advice on the termination from the law firm Priestleys. In his subsequent opinion, Daniel Priestley of the firm said the terms of the framework agreement did not require GLF to secure the funding, merely to show a plan for the funding. He believed they had sufficiently done so and further suggested that when Mr. Bush discussed the development with a “business concern based in China” there had been a possible breach of the GLF/Royal agreement.

Despite Mr. Glidden’s recommendation and Mr. Priestley’s advice, the government and Port Authority board refused to reinstate GLF/Royal and instead engaged China Harbour Engineering Company, a Chinese government-owned company, to develop the cruise berthing facility. In the aftermath of that decision, Port Authority board member Noel March had his appointment terminated by the government, while Chairman Stefan Baraud and Deputy Chairman Woody Foster both resigned.

GLF let it be known that it intended to take legal action for breach of contract and in November 2011, the government settled with the company by paying just under $2.1 million.

CHEC

In June 2011, Mr. Bush announced that he had signed “a ministerial memorandum of understanding” with China Harbour to build the cruise berthing facilities in George Town, but also to expand the Spotts Jetty and develop a cruise ship pier in West Bay. He indicated that China Harbour would be part of a management committee, along with the Port Authority and the government, to operate the George Town port.

Opposition to the choice of China Harbour was strong from the beginning, with questions about everything from the investigations the company was subjected to in other jurisdictions, to the fact that they were owned by a communist country.

China Harbour made few public statements about the project until November 2011, when it invited representatives of the Cayman Islands Chamber of Commerce along with the media to Jamaica to tour some of its projects there and to give an update on the plans.

It stated that it planned to build a facility that would provide berthing for up to four Oasis-class ships and incorporate a mega-yacht marina. It said that financing the project would involve China Harbour getting a 49- or 51-year lease on the upland portion of the facility.

That same month, the U.K. government required the Cayman Islands to pass legislation called the “Framework for Fiscal Responsibility” – commonly referred to as the FFR – which set out specific requirements for public tendering, project management and borrowing on major infrastructure projects. Among other things, the FFR required a third-party financial study on the port project.

With the requirements of the FFR in place, negotiations progressed slowly, but in March 2012, the government signed a framework agreement with China Harbour.

In November 2012, Mr. Bush announced he was abandoning the negotiations with China Harbour as a result of the U.K. government demanding the FFR be followed to the letter and that they would block the berthing project if it were not put out to public bidding. On Dec. 12, 2012, Mr. Bush was formally charged for various corruption and theft charges, all of which he was eventually found not guilty on. However, the week after his arrest, the Legislative Assembly had a vote of no-confidence against him, resulting in his removal as premier and the formation of a new interim government.

Efforts to create a new cruise berthing facility were back to square one.

PPM again

Although the interim government, which eventually called itself the People’s National Alliance, had talks with a cruise line about developing a new facility on a preferential berthing arrangement in early 2013, it didn’t progress much past the talking stage before the 2013 general elections caused another change in government, with the PPM gaining power again.

New Minister of Tourism Moses Kirkconnell started the new process just weeks after the election and said that while the government supported the creation of a cruise berthing facility, it did not support any upland development with it.

Mr. Kirkconnell said that the first thing the government planned to do was have an outline business case done for the project, which PwC was engaged to do in July 2013. He also said that same month that the government would also have an environmental impact assessment done.

The business case was completed and sent to Cabinet in October 2013. The business case recommended the government proceed with the construction of two piers in George Town Harbour and predicted that the completed project would inject between US$250 million and US$1.2 billion into the local economy and create up to 1,000 jobs over a 20-year period.

The report estimated that cruise passenger numbers would peak at around 2.3 million and that significant infrastructure improvements would be needed to accommodate those numbers.

In November 2013, the government said development of the cruise facility would require cooperation between and the involvement of both Royal Caribbean and Carnival Cruise Lines because it wouldn’t deal with just one of them.

A spokesman for Carnival Cruise Lines, however, said he could not think of a single example where the company had built piers that did not include an upland retail element, although he thought that sharing the passenger head tax might make the project financially feasible.

The request for proposals to conduct the environmental impact assessment was issued in December 2013 and eventually Baird Consulting was engaged to do the assessment.Over the course of 2014, while the environmental impact assessment was being done, an alternative to the proposed cruise berthing facility in George Town was suggested, namely that it be developed with floating piers to avoid dredging. The environmental impact assessment ultimately questioned the technically feasibility of the proposal and its ability to offer a sufficiently robust mooring system.

In June 2015, the completed environmental impact assessment was released to the public. It indicated that a large area of coral reef would be destroyed by constructing the two cruise berthing piers and reclaiming 7.7 acres of sea. The damage to marine resources would cost Cayman between $100 million and $165 million over 20 years, the report estimated.

Opposition to the project then solidified and an ad hoc group called Save Cayman started a petition to have a people’s initiated referendum on the dock plan. In response, another ad hoc group called “Cayman’s Port. Cayman’s Future.,” which included members of the Association for the Advancement of Cruise Tourism, formed to counter the rhetoric of those opposed to the project.

After more than a decade of talking about a cruise berthing facility on Grand Cayman, the project remains up in the air with many questions, including how it will be paid for, left unanswered, and more opposition to the project than ever. Back in 2002, Premier Alden McLaughlin – then a first-term MLA – might have best described the challenge of building cruise facilities when he commented on a related aspect regarding cruise tourists in George Town.

“Whatever position is taken by the Port Authority, and ultimately the government, about the situation of the cruise ship facilities, there is going to be controversy,” he said then, foretelling in one sentence 13 years and counting of cruise berthing frustrations.